Iraq Plans to Increase Oil Productionby
Iraq's plan to boost oil output with the help of foreign companies may upset the Organization of Petroleum Exporting Countries' efforts to support prices because the nation has no quota to limit its production.
Oil companies including Royal Dutch Shell (RDSA), BP (BP), and OAO Lukoil may help Iraq meet a target to boost oil output capacity to 12 million barrels a day in the next six years after winning oil licensing rounds earlier this year.
Oil has gained 64 percent since the beginning of 2009, when OPEC output cuts agreed late last year took effect, and is currently at about $73 a barrel. The group left production targets unchanged today at a meeting in Luanda, Angola.
"In the next couple of years Iraq is expected to come back with more oil and obviously it needs the other members to make space for them," Johannes Benigni, chief executive officer of JBC Energy, said in a Bloomberg Television interview. "With prices at $75 everyone is happy and no one needs to touch the hot iron, but down the line, obviously, everyone sees this issue coming up."
Iraq, holder of the world's third-largest oil reserves after Saudi Arabia and Iran, aims to boost production from about 2.4 million barrels a day. The Persian Gulf state offered almost a third of its reserves in the second license round as it seeks to rebuild its economy after almost a decade of conflict and sanctions. OPEC Secretary-General Abdalla el-Badri said today he doesn't expect Iraq's output to increase for five to six years.
"I am sure we will accommodate Iraq," el-Badri said in Luanda today. OPEC will "sit and discuss" Iraq's output "at one point in time," he said.
Historically, Iraq's OPEC quota has often been similar to that of Iran, which is currently pumping about 459,000 barrels a day more than its OPEC quota of 3.336 million barrels a day, according to Bloomberg estimates. Iraq's last OPEC quota was for 1.314 million barrels a day in early 1998 as it sold crude under a United Nations program to buy food and medicine, according to statistical data on the Vienna-based group's Web site.
Saudi Arabia, the biggest producer in OPEC, increased output to meet demand as Iraq's supplies fell after it invaded Kuwait in 1990. Iraq's reintegration into the quota system "will take some give-and-take eventually," Saudi Oil Minister Ali al-Naimi said today in Luanda.
Saudi Arabia "took nothing" when it boosted output in the 1990s, al-Naimi said. "We ensured the market was well-supplied. If it were not for Saudi Arabia the market would have been in very bad straits."
Iraq may in 2011 "start discussing the criteria for our quota," Oil Minister Hussain al-Shahristani said in Luanda earlier today.
OPEC's 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The group's next meeting is scheduled for March 17 in Vienna.